FDIC learns it ignores bloggers at its peril
The federal agency insuring bank deposits learned that it can’t afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s.
“The blogs were a bit out of control,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week.
That’s putting it mildly. Following the FDIC’s takeover of Pasadena’s IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California’s largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions.
The FDIC plans to pay closer attention to the blogosphere in the future.
“We’re very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it,” Bair said. “The misinformation that came out over the weekend fed a lot of depositors’ fears.”
The FDIC also plans to begin airing public service announcements as part of a public education campaign on the nation’s deposit insurance program.
Although Bair declined to disclose financial institutions on the agency’s troubled-bank list, she said most institutions on the list will survive. Some, though, may decide to team up with healthier institutions. Historically, only 13 percent on the troubled banks list actually fail, she said, adding that disclosing who is on the troubled list would likely boost the failure rate from 13 percent to 100 percent as customers pulled deposits.
Many are watching how some of the nation’s largest banks will cope with their mortgage-lending woes, including Washington Mutual (NYSE: WM), Wachovia (NYSE: WB) and Cleveland-based National City (NYSE: NCC).
“These are challenging times for a number of institutions large and small,” Bair said. “We’ve worked with them as their primary regulator. They’ve raised a lot capital, they’re getting their loan loss reserves up. They’re doing everything they can and should do.”
“The capital is there to absorb the losses,” she added. “Some will have some bad quarters, but still overall they’re quite solvent, healthy institutions, and they’ll get through this.”
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